Employer Employee Insurance Scheme: Eligibility and Benefits

  • Author :
  • TATA AIG Team
  • Published on :
  • 12/03/2024

Employer Employee Insurance is a great initiative that allows an employer to take care of his employees by providing them with extensive medical insurance coverage.

Not only for the employees of an organisation the employer employee insurance policy is beneficial for employers as well. From employee retention to a positive work environment, this health insurance scheme is bundled with multiple advantages.

Let’s find out what they are in detail.

What is Employer Employee Insurance?

The Employer-employee insurance scheme refers to a category of business insurance that involves an employer purchasing insurance for their employees. It is usually a part of an employer's employee benefits program and lends financial support to the employees in the event of medical emergencies.

As discussed above, this scheme is purchased by employers who want to retain their existing employees and attract new talents to the organisation.

The feature that makes the Employer-Employee Scheme stand apart is its extended coverage to the family members of the employees.

Moreover, the coverage can include medical emergencies, hospitalisation, accidents, etc., based on the type of policy.

Employer Paid Health Insurance Benefits

For the Employer

Employee Retention: By providing employee medical insurance, employers can make their employees feel valuable to the organisation. It helps in increasing retention rates as employees are less likely to move to another employer. In addition, it keeps them motivated and productive.

Hiring New Talents: Not just existing employees, an Employer-Employee Insurance Scheme can also help in attracting new candidates to the organisation. The reason is simple:** most professionals prefer working in a company that offers benefits like health insurance. It can be a critical deciding factor that may help employers stand out from their competitors.

Tax Benefits: The employer can declare the insurance premium cost under business expenses, which can save a lot on taxes.

Employer-employee Relationship: By offering medical coverage against certain medical emergencies, employers can build a strong and long-term relationship with their employees. This, in turn, increases the overall reputation of the employer.

Increased Work Efficiency: Having health insurance from employers can also encourage employees to lead a healthier lifestyle. It helps them prioritise their health without worrying about the rising medical costs in the country. This can further improve their working efficiency and productivity.

For the Employee

Personal Health Cover: First and foremost, employees who are a part of a group health insurance (Employer-employee insurance) plan get medical coverage for emergencies and hospitalisations.

It means that their unforeseen medical expenses will be covered by their health insurance and they won’t have to bear the financial burden.

Family Cover: Not just the employees, but their family members are also covered by the employer-paid health insurance plan. This typically includes their children, spouses, and dependent parents based on the type of policy.

Accident Cover: Employees covered under group health insurance may also get coverage for personal accidents and related injuries.

It means that if the employee gets injured in an unforeseen road accident, then the hospitalisation and other medical invoices will be covered by the insurance provider.

Tax Benefits: By contributing towards the employer’s health insurance premium, an employee can claim tax deductions under the IT Act Section 80C up to the limit of contribution.

Cashless Treatment: Reputed insurance providers like Tata AIG allow policyholders to get cashless treatment at any hospital or healthcare facility across India.

In simple words, insurance holders can get their treatment without paying ant this out of their pockets. The insurance company will directly settle their medical bills.

Employer-Employee Insurance Tax Benefits

Tax Benefits for Employer: According to Income Tax Act Section 17(3), the insurance premium paid by an employer to his employees can be declared under business expenses or “Profit in lieu of Salary”.

Thus, an employer can get tax deductions by showing a premium amount as a business expense.

Tax Benefits for Employees: Under Section 80C of the IT Act, if employees contribute towards an Employer-paid insurance scheme, they can also claim tax deductions up to the amount of contribution.

Eligibility Criteria for Employer Employee Insurance

  • Employees should have an official relationship with their employer. They must receive a salary based on the services provided by them to the employer.

  • Part-time and contract-based employees are generally excluded from the scheme unless stated otherwise.

  • Any company, firm, or organisation can purchase health insurance for their employees under the Employer-employee Insurance Scheme.

  • Even the loss-making firms can buy an Employer-paid insurance scheme.

  • Some insurance policies may have a certain waiting period for employees who are on their probation period.

  • Some insurance schemes may also require a specified service period from the employee to provide them with medical coverage. However, this requirement can vary from one provider to another.

Type of Arrangements Available for Employer Employee Insurance Scheme

Type A

It is the first and most common type of arrangement available for the Employer Employee Insurance Scheme (group health insurance). The following are the key factors:

The employer buys an insurance policy for the benefit of the employee. The employer pays the entire premium amount without the contribution from the employee.

If the employee leaves the organisation, they can convert the group health insurance into an individual insurance plan based on the policy terms and conditions.

Type B

In the second type of arrangement, the employer, along with the employee, is the policyholder of the group health insurance. The employer purchases the policy, and the employee contributes to the premium either partially or fully. The following are some key features of this arrangement:

The employer proposes a basic coverage to the employee, giving them the option to make customisations.

Employees get the freedom to customise a health insurance plan provided by their employer. They can make changes to the coverage based on their health conditions and specific requirements.

Employees are responsible for paying for the extra coverage if added by them.

Employees are the owners of their policy. They don’t have to face any restrictions.

Both the employer and the employee can claim tax benefits up to the extent of their contribution to the policy.

Final Words

The Employer-Employee Insurance Scheme is an integral part of a business or an organisation. It is an initiative that encourages a strong bonding between employees and the employer and fosters a positive working environment.

By providing health insurance to their employees, employers can make them feel valued by the organisation. It keeps the employees highly motivated and also enhances their productivity.

Whether you are a business owner or running a partnership-based organisation, consider purchasing group health insurance for the excellent benefits it comes with.

As a renowned business insurance provider, Tata AIG has been providing high-quality group health insurance schemes for more than a decade.

Our group medical insurance comes with benefits such as comprehensive coverage, coverage to the family members of the employees, no waiting period, cashless treatment, hassle-free claims, and more.

For more information on our plans, contact us!


Is employer-paid health insurance taxable to employees?

The employer-paid health insurance is taxable to employees only when they are also contributing towards the policy premiums. In other words, if they are paying for the insurance premium, then it is subject to taxation.

Fortunately, Section 80C tax deductions can be availed by the employees for the premium amount paid by them.

Who is not eligible for an Employer-Employee Scheme?

Below are the entities that are not eligible to buy an employer-employee insurance plan:

A business group or firm that only has family members running the organisation. There is not a single non-family member in the organisation.

A self-employed person or a business owner who does not have any full-time employees. Note that freelancers or part-time workers are excluded from the benefits of the employer-paid health insurance scheme.

Can a partnership-based firm purchase an Employer-employee insurance scheme?

Yes. Any partnership-based company can buy the Employer-employer insurance scheme for their employees. However, they must align with the given eligibility criteria.

Disclaimer / TnC

Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.

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